Speech  of Selvi J JAYALALITHAA Chief Minister of Tamil Nadu
49th N.D.C. Meeting, 1^st September 2001, Vigyan Bhavan, New Delhi.

Honourable Prime Minister and Members of the National Development Council,

I am happy that this meeting of the National Development Council has been convened after a gap of two and a half years, and is discussing major issues of relevance and concern to the States.

2. The focus of the Ninth Plan was "growth with social justice and equity". It was expected that the Ninth Plan would take the nation into the next millennium with an accelerated growth and development path. However, we find that the actual achievements have fallen short of targets. As against a growth rate of 7% envisaged, the country has achieved a growth rate of slightly over 6% in the first 4 years of the Plan. The social and economic achievements have also fallen short of the targets. Growth has occurred sporadically and the desired equity has not been achieved.

3. I welcome the Prime Minister's directive to the Planning Commission to aim at doubling the per-capita income within a period of 10 years, with a view to drastically reducing poverty over this period. I share the concerns expressed in the Approach Paper to the Tenth Plan on the deceleration of the economy, the continuing high incidence of unemployment and under-employment, stagnation of infant mortality rates, land and forest degradation and over exploitation of ground water. While I welcome the initiatives indicated in the Approach Paper to achieve an accelerated growth rate of 8% per annum, I would like to stress that this target is a stiff one to achieve and will require special efforts, both at the Centre and the State levels. The need for growth with equity and sustainability, spelt out in the paper, are extremely relevant in this context and would need to be the main focus at all stages.

4. Tamil Nadu has been in the forefront in achievements in the areas of education, health, welfare of women and children, and in poverty alleviation programmes. Most of the monitorable targets identified for the Tenth Plan have already been reached by Tamil Nadu and we are aiming to further enhance our achievements in these sectors. We are, however, aware that there are areas of specific concern that have to be addressed by us. In the last few years, in some key areas, there has been loss of the earlier momentum and we need to step up our efforts to regain the earlier vitality and drive. Though our literacy rate has increased considerably, male-female and rural-urban divides are still significant and need to be bridged. Our population growth rate has been reduced to replacement levels. The declines in infant and maternal mortality rates have slowed down in the last few years and need further thrust. Though the improvement in the sex ratio is very encouraging, there are pockets within the State where the ratio is adverse, and which require micro level interventions. Poverty in Tamil Nadu, as per National Sample Survey Organisation (NSSO) survey, has shown a decline from 35.03% in 1993-94 to 21.12% in 1999-2000. There are, however, considerable regional disparities in per capita incomes and poverty levels. My Government will sincerely endeavour to correct these disparities over the Tenth Plan period.

5. The Tamil Nadu economy has moved from a predominantly agrarian economy to one driven by growth in the services sector. Tamil Nadu has, in the last ten years, seen a spurt in investments by the private sector, particularly in Information Technology. The services sector today accounts for 48% of our GSDP. However, over 50% of our work force is still employed in the primary sector, mainly agriculture, which contributes only 18% to the GSDP. The growth rate of the primary sector has remained sluggish in the last few years and this is a matter of concern to us. Revitalizing the agriculture sector, which has the highest impact on rural poverty and employment, will be one of our highest priorities. We are constrained by the fact that about 50% of our cropped area is rain-fed, dependent entirely on the vagaries of the monsoon. In the irrigated areas, the irrigation potential has almost fully been tapped. The ground water exploitation has resulted in depletion of ground water reserves. Substantial investments will be necessary to ensure efficiency in water conservation and management and increase in productivity in the irrigated areas. My Government has taken a decision to set up a Water Resources Conservation Department to consolidate all schemes and resources for water conservation, to ensure optimum efficiency. With a view to improving the welfare of small and marginal farmers and agricultural labour, my Government is taking the initiative to develop 20 lakh hectares of wastelands in a phased manner, by adopting a watershed approach, to ensure recharging of ground water. The emphasis here, will be on horticulture and tree-crops and remunerative grass and fodder cultivation, which will generate higher income to the farmers. We are setting up a Watershed Development Agency to provide focussed attention on these aspects. We seek the Government of India's assistance in funding this programme. We are also setting up a Department of Agri-Business to give a thrust to food processing industries in the State.

6. On food security and Public Distribution System, we are fully seized of the need to improve efficiency as well as better targeting of BPL families. However, I request the Government of India to have detailed consultations with the States on issues relating to amendments to the Essential Commodities Act and removal of licensing controls. Alteration of existing schemes and introduction of new schemes, as also, changes in policy, without detailed discussions with the States, may cause significant distortions and give rise to serious management issues at the micro-level.

7. The manufacturing sector has to act as a catalyst to ensure the growth rate of 8% in the Tenth Five Year Plan. Improvement on the industrial front requires investments in infrastructure and also further simplification of procedures and controls. Thrust, in the post WTO era, should be on efficiency and competitiveness in the world market. I welcome the suggestions made for revitalising the infrastructure sectors.

8. I am happy to note the suggestions outlined in the Approach Paper to undertake fiscal correction by the Centre in the Tenth Plan period. It is a matter of concern that revenue and fiscal deficits of the Centre have increased alarmingly, and that nearly half of current borrowings go to financing current expenditure. We are concerned at the fall in the Tax / GDP ratio at the Centre, which in turn has resulted in lower devolution to the States, and affected our Plan implementation adversely. I urge the Centre to correct the fall in tax revenues and take steps to ensure buoyancy and expansion of the tax base. I also endorse the suggestion that the Centre should increase its savings by around 2.9% of GDP by enhancing revenues and moderating unproductive expenditure.

9. It is a fact that the finances of the State Governments have deteriorated rapidly since the mid 1990's. The situation in Tamil Nadu is a matter of concern as both our revenue and fiscal deficits have grown in the last five years. The State Government has been forced to borrow more to finance its capital projects and also to meet its revenue deficit. We are aware of the need to make fiscal corrections. My Government has already laid a White Paper on the state of our finances in the Legislative Assembly. We have identified the critical areas that need corrections. However, we are constrained by the fact that the State already has one of the highest Tax / NSDP ratios in the country, and the scope for further taxation is very limited.

10. Our efforts are also constrained by the fact that successive Finance Commissions have denied our State its rightful share in the devolution of Central taxes. The percentage share of Tamil Nadu, which was 6.637% as per the Tenth Finance Commission, has gone down to 5.385% as per the Eleventh Finance Commission's award. Thanks to the modified criteria adopted by the Eleventh Finance Commission, Tamil Nadu will forgo nearly Rs.3000 crores during the five years 2000-2005. This is tantamount to penalising States which have performed well in critical areas like rural development, poverty alleviation programmes and population control. Similarly, our share of assistance for poverty alleviation programmes has gone down from 7.062% to 4.987% from 1998-99 onwards. Any further reduction on the basis of 1999-2000 poverty data of NSSO would severely affect our welfare programmes. There is a real danger that cuts in such programmes could result in a large proportion of the population marginally above the poverty line regressing back into poverty. I urge upon the Government of India to implement the recommendations of the NDC Sub-Committee on the criteria for allocation of funds under major rural poverty alleviation programmes, to provide incentives to States that have performed well in poverty reduction.

11. While I commend the measures suggested by the Planning Commission to link development assistance to performance, I find that the incentive fund proposed for fiscal reforms is totally inadequate and fails to compensate for the loss to the State caused by the Eleventh Finance Commission's award and reduction of share on poverty alleviation programmes. The amount of incentive that would accrue to Tamil Nadu Is around Rs.400 crores for the 5 year period 2000-2005, as against the loss of around Rs.3600 crores.

12. On the issue of transfer of Centrally Sponsored Schemes to the States, I understand that a Committee of the NDC has deliberated in detail, regarding convergence / merger of schemes as well as modalities of transfer of resources to the States. We welcome the suggestion to transfer all Centrally Sponsored Schemes to States, other than those that have inter-State ramifications, along with the resources therefor. I would, however, like to emphasize that States should be allowed to have adequate flexibility to implement the schemes according to their special needs and priorities as past experience clearly shows that a single set of guidelines, made applicable to the entire country, is impracticable and out of tune with ground realities

13. I would also plead for flexibility in the implementation of Central programmes such as Prime Minister's Gramodaya Yojana, for which funds are made available to the States, as Additional Central Assistance (70% loan and 30% grant). Many of the sectoral guidelines issued by the administrative departments for PMGY are found to be not applicable to States like Tamil Nadu, where similar schemes have been under implementation long before the Centra! programme was formulated, as for example, nutrition for pre-school children. Because of rigidity of the guidelines, we are unable to utilize our legitimate share of the allocations for poverty alleviation programmes on a need basis. I hope that the Prime Minister and the Planning Commission will take note of these aspects and issue guidelines for greater flexibility and autonomy to the States in such matters.

14. Tamil Nadu is committed to strengthening Panchayat Raj institutions to give more power to the people to make decisions based on their own needs and priorities. Even prior to the 73^rd Constitutional amendment, Tamil Nadu had a strong 2-tier Panchayat Raj system, with elected bodies at the village and block levels. The system was functioning smoothly and efficiently. However, with the 73^rd and 74^th Amendments, the three-tier system has come into force. The District Panchayat, which was introduced after the 73^rd amendment, is not very relevant to Tamil Nadu and there is a need to restore the original two-tier system. We have made a request to the Union Government to amend Article 243 B of the Constitution of India, to empower the States to decide which two of the three tiers are to be retained by the State. Article 243 C also needs to be amended, to permit direct election to the posts of Chairmen of Block Panchayats.

15. We welcome the suggestions in the Approach Paper to improve efficiency of public assets and quality of expenditure in the public sector, as well as the recommendations for selective use of Plan funds for critical repairs and maintenance and not just for creation of fresh capital. I whole-heartedly endorse the views of the Planning Commission on removing procedural and legal hurdles to investment, and on improving Government's interface with the public.

16. The Prime Minister and the Planning Commission have set out in great detail, the challenges to be faced in the new millennium and the thrust to be given to the unfinished agenda of poverty alleviation along with faster growth. Strong commitment and decisive action are required if the country is to forge ahead in social and economic spheres and take its rightful place in the comity of nations. My Government will extend full co-operation in meeting the challenges with sincerity and vigour.